'The fox knows many things…'

i3 Podcast Ep 28: Tobias Carlisle

Tobias (Toby) Carlisle is a deep value investor and founder of Acquirers Funds. He is author of the best-selling books ‘The Acquirer’s Multiple’, ‘Deep Value’, ‘Concentrated Investing’ and ‘Quantitative Value’.

Toby has extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. He has also worked as an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer.

More recently, Toby launched a deep value ETF, The Acquirers Fund (ticker: ZIG), which holds long positions in deeply undervalued, fundamentally strong targets for activists and buyout firms, and short positions in overvalued, financially weak companies. It started trading on the NYSE Arca in May this year.

Overview

3:00 I was working as a lawyer in M&A when the tech crash happened
8:00 There is this phenomenon in deep value where the worse the quality, the better the performance tend to be.
12:00 Developing a quantitative value metric without the quality metric gives you better raw performance.
13:00 Daniel: if you test Joel Greenblatt’s magic formula on Australian stocks it pushes you into all these mining companies.
16:00 The spread between the most undervalued and overvalued stocks are at historic widths.
19:00 There are secular issues with price to book measures.
20:00 Factors give this nice impression that it is scientific and filters out human emotion, but the rules change all the time.
30:00 It is hard to short a cult
32:00 Shorting on valuation is not the way to short; you want financial distress
33:00 Keep shorting positions small
36:00 Why launch the fund as an ETF and not as a mutual fund?
40:00 Do you have sector constraints?
43:00 Shannon’s Demon
45:00 The Kelly Criterion
53:00 Criticism of using EBITDA metrics
57:00 There is a machine learning component to the analysis
1:00:00 Most investors are better off to hold a low cost index fund, but I believe that over the long term a value strategy will outperform the market
1:01:00 There is a paper that says value investors win at the expense of other value investors.
1:04:00 Blending managers is a difficult puzzle to solve.
1:09:00 The rise of the fourth Buffett
1:10:30 Which lessons have you learned the hard way? …. All of them
1:13:00 We are all cognitively impaired.